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Dear Mr.Keshav,
Pl.read the remarks together with Sec.12: reproduced here under:
Section 12 in The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
“ 1[12. Employer not to reduce wages, etc.—No employer in relation to 2[an establishment] to which any 3[Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution to 4[the Fund or the Insurance Fund] or any charges under this Act or the 3[Scheme or the Insurance Scheme], reduce, whether directly or indirectly, the wages of any employee to whom the 3[Scheme or the Insurance Scheme] applies or the total quantum of benefits in the nature of old age pension, gratuity 5[, provident fund or life insurance] to which the employee is entitled under the terms of his employment, express or implied.]”
In this background the present notification clarifies that –
Provident Fund Office has allowed companies to cap their per-month Provident Fund contribution to employees at Rs. 6,500. At present, companies contribute an amount equal to at least 12 per cent of an employee’s basic salary towards his/her PF. Now When an employer is deducting and depositing Employees’ Provident Fund contributions upon more than the prescribed salary, he can reduce it to Rs. 6,500 per month and in that event, section 12 of the Employees’ Provident Funds & Mis¬cellaneous Provisions Act providing bar for not to reduce wages will not be attracted.
In otherwords, e.g. an employee drawing Basic + DA say Rs.10000 and he is willing to contribute 12% on entire 10000 without restricting to 6500, since when a willing employee can contribute @ 12% on salary not limited to Rs.6500 whereas the employer can limit/cap the salary only upto Rs.6500/- in which case the employer will not be found fault as per Sec.12 as above and it wouldn’t be construed to mean the employer “reducing the wages”. This is nothing new now, this is an already existing proviso which only amplified quoting the Circular now issued.
With regards